Far 4 - Fixed Asset Impairment

Question 1

When do you review fixed assets held for use or to be held to be disposed of for impairment loss?

Answer 1

Atleast annually OR whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Question 2

What are steps for impairment loss discovery (test for recoverability) under U.S. GAAP?

Answer 2

Step 1) If carrying amount is greater than sum of undiscounted future cash flows - THEN THERE IS IMPAIRMENT.

Step 2) Subtract FV (or PV of future cash flows) - CV = IMPAIRMENT LOSS

Step 2) Subtract FV (or PV of future cash flows) - CV + COST OF DISPOSAL = IMPAIRMENT LOSS

Question 3

For which items is restoration permitted under U.S. GAAP?

Assets held for use or assets held for disposal?

Answer 3

Only assets held for disposal are permitted for restoration.

Question 4

What are steps for impairment loss discovery (test for recoverability) under IFRS?

Answer 4

1) CV is subtracted by RECOVERABLE AMOUNT.

Recoverable amount = greater of FV less costs to sell or asset’s value in use.